Palantir’s Miserable Week Earns Billions for Struggling Shorts

Palantir Technologies Inc. is experiencing its steepest selloff in months, erasing $73 billion in market value over a six-session losing streak a rare moment of relief for short sellers who have been battered by one of this year’s strongest performers on Wall Street.

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Since peaking at a record high on August 12, shares of the data analytics and software giant have plunged more than 17%. This marks the company’s longest downturn since April 2024 and positions it for its worst week since the tariff-driven slump earlier this year.

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The sharp drop has delivered short sellers over $1.6 billion in paper gains, according to figures from S3 Partners LLC. However, that windfall barely offsets the $4.5 billion in losses short traders have racked up betting against Palantir throughout 2025. Despite the recent weakness, Palantir remains the year’s top-performing stock in the S&P 500, up an astonishing 106%.

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Palantir’s massive rally earlier this year sent its valuation soaring to lofty levels. Yet even with such gains, bearish traders have steadily exited their positions as momentum proved relentless.

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Short interest measured as a percentage of the company’s float has dropped to around 2.5%, down from nearly 5% a year ago. This signals that many short sellers covered their trades as prices surged, noted Matthew Unterman, managing director at S3 Partners.

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They either wanted to avoid getting steamrolled by a powerful momentum play or were forced out once the freight train hit,” said Steve Sosnick, chief strategist at Interactive Brokers LLC.

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The recent pullback isn’t happening in isolation. Palantir’s slump mirrors a broader decline among mega-cap tech stocks that has weighed on both the S&P 500 and Nasdaq 100. Investors appear to be taking profits and shifting toward more reasonably priced sectors of the market.

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“The correction we’re seeing in Palantir was long overdue and it’s not driven by short sellers,” said Vikram Rai, portfolio manager and macro trader at FNY Capital Management LP. “When big names like Google, Meta, and Microsoft start sliding, high-beta stocks that are wildly overvalued naturally fall harder.”

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Unlike some of the dramatic squeezes seen in other popular stocks, Palantir’s surge this year wasn’t fueled by short sellers scrambling to cover. Instead, gains were primarily driven by bullish long-term investors piling in on optimism around AI and data analytics demand.

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Still, the recent weakness is tempting some traders back into bearish positions. Since early June, short interest in Palantir has climbed by roughly 10 million shares, according to S3 data. With about 2.3 billion shares outstanding, the stock remains liquid and highly traded.

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Even if the current downtrend pauses, analysts say contrarian activity could keep increasing.

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“If Palantir bounces even a little, you’ll see short sellers re-enter,” Rai predicted, while cautioning against rushing into fresh bearish bets. “The stock has revealed its hand there’s a downward bias now.”

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What It Means for Investors

Palantir’s recent volatility underscores the risks of chasing momentum in high-valuation tech names. While the company remains a top performer for 2025, its sharp reversal highlights how quickly sentiment can shift in crowded trades.

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For long-term investors, the key question is whether Palantir’s fundamentals justify its premium price after such an extraordinary run. For traders, the growing tug-of-war between bulls and bears could set the stage for more dramatic swings in the weeks ahead.

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